What do you think were the top mutual funds of 2005? Look around you. Housing stocks started off the year strongly. The energy sector made millionaires out of some modern-day Jed Clampetts. We can't ignore the precious-metals specialty funds, either, as an ounce of gold hit $500.

However, last year's three best-performing mutual funds didn't own any of these hot stocks. They weren't even sector-specific. Instead, the big winners of 2005 invested in Japan, Russia, and Korea, respectively.

Top Funds 2005
ProFunds Ultra Japan (UJPSX) +91%
ING Russia (LETRX) +71%
Fidelity Advisor Korea (FAKAX) +69%
*Source: Lipper Analytical Services.

It wasn't a fluke. While you and I may have been chasing hot stocks closer to home, 11 of the 14 best-performing funds were all buying into hotter markets overseas.

Stretch your horizon to span the past five years, and the three most rewarding mutual funds during that time also have an international flavor. They bought into Eastern Europe.

It's a small investing world after all
Maybe I know where you're coming from. You have a little patriotic fervor in you. You think that by buying into a company like Coca-Cola (NYSE:KO) or McDonald's (NYSE:MCD) that you are getting plenty of global exposure. You're right to a certain extent. As these colossal conglomerates expand, every passing year finds international operations commanding a thicker slice of the revenue pie. Coke and McDonald's are taking over the world, one sipped soda and munched burger at a time.

However, it doesn't always work out that way. The best investing ideas aren't always indigenous. Domestic automakers continue to yield market share to smaller overseas imports. Then we have Oracle's (NASDAQ:ORCL) Larry Ellison. He isn't one to mince words. When it comes to enterprise software it seems as if Ellison either wants to taunt you or buy you out. He doesn't think much about his North American rivals but he has the utmost respect for Germany's SAP (NYSE:SAP), the leader in enterprise resource planning software.

Less than 5% of the world's population lives inside the United States. Do you really want to ignore the other 95% because patriotic pride finds you devouring baseball, apple pies, and pints of Ben & Jerry's? Speaking of which, you do know that, six years ago, Ben & Jerry's was acquired by Anglo-Dutch giant Unilever (NYSE:UL), right? Just checking.

The 95% solution
The only legitimate reason to avoid buying into international stocks is that you may feel as if you don't have an investing advantage there. You can kick the tires of a local company fairly easily, but stepping foot in an Australian bank or a Korean bottler is a costly passport stamp away.

However, are you doing your portfolio an injustice if you ignore the companies that reside where the other 95% live? More and more American investors seem to think so. A few of our stock newsletters have singled out promising companies that just happen to reside overseas.

If dabbling into individual foreign stocks still feels, well, foreign, there is another alternative. Mutual funds provide an investor with a way to ride the global marketplace through an experienced money manager.

I'm a believer in buying international mutual funds. I have owned Oakmark International Small Cap for ages. The fund has averaged a respectable 14% annualized return since its inception more than a decade ago. Unfortunately, you can't follow me there. The fund is closed to new investors. However, there are plenty of other quality mutual funds that specialize in stocking up overseas.

Shannon Zimmerman has hand-picked four different mutual funds that specialize in trotting the globe for market beaters for his Champion Funds subscribers. All four were historical overachievers with stellar results before Shannon took a public liking to them, and they haven't let his readers down. All four are currently trouncing their respective index averages since being singled out.

His latest pick's largest holdings include companies like the acquisitive Mexican cement maker Cemex (NYSE:CX) and Spanish oil and gas giant Repsol YPF (NYSE:REP), and 60% of its current holdings are based outside the United States. Cemex has been riding the construction boom South of the border, while Repsol has been the beneficiary of a world hungry for crude oil and natural gas exploration and production.

As the world earns
If you want to learn more about Shannon's international picks -- or simply to be ready for when Shannon adds a fifth overseas hottie to his growing list of fund picks -- let's make it easier than hopping around from country to country like some contestant on The Amazing Race.

Take part in a 30-day free trial that will grant you access to all of Shannon's picks, commentaries, and model portfolios. If you like what you see, stick around and become a Champion Funds subscriber. Yes, it can be a small, small, world. Thanks to a mutual fund maven like Shannon, it can become an easier and more profitable world, too.

Longtime Fool contributor Rick Munarriz thinks that funds are part of a balanced portfolio breakfast. He does not own shares in any of the individual companies mentioned in this story. Coca-Cola is a Motley Fool Inside Value recommendation. Unilever is a Motley Fool Income Investor recommendation. The Fool has adisclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.